Japan – will consumption ever grow again?

My latest video, discussing the important question posed in a report of a few weeks ago. Japan's population peaked in 2010, and aggregate consumption stopped growing shortly after. With the number of people continuing to shrink, can consumption – and thus the broader economy – ever grow again?

Paul Cavey

Sep 19, 2025 • 1 min read

The full report can be accessed here.

Video Chapters

0:00 - Introduction: Japan's Economic Context and Demographics
1:51 - Exploring the Data: Aggregate Consumption Trends Since 2013
3:36 - Connecting Consumption to Population Decline
4:57 - Acceleration of Population Decline and Future Projections
6:51 - Beyond Demographics: Alternative Explanations for Weak Consumption
7:28 - Per Capita Consumption: A Different Perspective
9:09 - Labor Market Dynamics: Participation, Wages, and Complications
12:03 - Measuring Purchasing Power: Top-Down vs. Bottom-Up Approaches
14:22 - Aggregate Consumption Challenges: Household Share of GDP
16:41 - Labor Share Trends and Structural Changes
19:20 - Income from Savings and Investments: Reversal in Trends
21:19 - Social Security and Government Policies: Impacts on Households
24:27 - Political Shifts and Potential Tax Reforms
25:49 - Prospects for Household Income Recovery
27:06 - Risks and Uncertainties: Demographics and Substitution Effects
29:19 - Conclusion: Economic Normalization and Consumption Outlook
29:48 - East Asia Econ: Resources and Closing Remarks

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East Asia Today

Today's data releases included Japan wages (messy, but some interesting details), Korea's current account surplus (big, but not helping the KRW), and Taiwan inflation (low compared with ROW, high compared with history). Also, a link to a slide pack summarising my views for the region.

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Korea – CA surplus not helping the KRW

Data today show Korea's current account surplus remaining at over 5% of GDP. The fundamental driver is a fall in borrowing by the corporate sector. This structural surplus hasn't started to support the KRW. One reasons is continued outflows from the NPS.

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Japan – soft headline wages, details a bit better

Wage growth was softer in September. The continued slowdown in part-time wages per hour will be a bigger concern if it persists beyond the October rise in the minimum wage. Per hour full-time wage growth is stronger than the headline, though the data are noisy.